Blowing up the world trading system has consequences that the President isn’t advertising.
President Trump unveiled his new “liberation day” tariffs on Wednesday, and they are another large step toward a new old era of trade protectionism. Assuming the policy sticks—and we hope it doesn’t—the effort amounts to an attempt to remake the U.S. economy and the world trading system.
All details aren’t clear as we write this, but Mr. Trump’s tariffs look “reciprocal” in name only. First he’s hitting every nation in the world with a 10% “baseline” tariff to sell in the U.S. market. For those he calls “bad actors,” he’s adding up the country’s tariff rate on U.S. goods, plus an arbitrary estimate of the cost of its “currency manipulation” and non-tariff barriers. He then takes that total number and applies half of that in tariffs on the country’s exports to the U.S.
• New economic risks and uncertainty. The overall economic impact of Mr. Trump’s tariff barrage is unknowable—not least because we don’t know how countries will react. If countries try to negotiate with the U.S. to reduce tariffs, the damage could be milder. But if the response is widespread retaliation, the result could be shrinking world trade and slower growth, recession, or worse.
For decades, East Asian countries made it almost impossible for American companies to sell their goods there. They'd makes them for them in their slave labour factories but allow them a fair chance on their markets? Nope.
ReplyDeleteHe is trying to reset the equilibrium of world trade. But tariffs alone will not fix the economy and it might prove to be counterproductive
DeleteRemember your complaining about BLM for destroying the society that had problems.
DeleteWhy are you defending the Trump anarchy as he and Musk are destroying America? Perhaps you are hoping he destroys Canada also?
I think the tariffs are long overdue.
DeleteWesterners live affordable lifestyles on the back of slave labour in Asia and Africa. It's about time we leearned the true cost of things made properly.
Musk is leaving Government, so it's only trump left to destroy America.
DeleteTariffs are economic measures. Just imagine foreign exchange rates. So import taxes also fluctuate and then may need to change.
Perhaps America will not be able to produce everything. Or china may compensate its exporters and flood the market with cheap goods.
When it comes to basics, America can produce most things. Hi tech not so much because of the rare earths and minerals but tariff negotiations would be a great way to secure access to those.
DeleteThe question is: Do Americans want to pay $250 for a basic white shirt madde in Iowa that they now pay $40 for that's made in Viet-nam?
Even hi tech they can manufacture. Rare earths are available, they can be imported
DeleteTry buying a shirt made in England for £50
It's usually labour costs that are more expensive.
But people may not want to drive American cars, they prefer German, Italian etc.
Consider this:
DeleteUntil the 1980's, Israel was pretty self-sufficient for most things. Because of the Arab boycott, it had a large agriculture and textile industry. Kibbutzim made pretty much everything useful for day to day. I remember when I lived on a kibbutz in the mid 80's, we got everything from other kibbutz factories - shoes, clothes, basic staples, etc.
Then the Arab boycott ended and suddenly Israel was open to the world and quickly discovered it prefered the world because the world made a greater variety of bettery quality stuff at a cheaper price. So now Israel has a much smaller agricultural industry and the textiles are all gone. Even Rimini's Pizza couldn't handle the arrival of Pizza Hut and Domino's. That's what happens with globalization.
The US and West also discovered, around the late 80's, that Asia and Africa were open for business and willing to provide skilled labour at slave wage prices. So they outsourced their manufacturing and set up their supply lines to take advantage of this. Instead of buying an American made dress shirt made in an American factory from American produced fabric by American workers paid the American minimum wage, I could by the same shirt at the same quality for a fraction of the price as long as I was okay with the label saying "Made in China".
That killed a lot of American manufacturing and kept it from coming back because it couldn't compete with those prices.
Now America is vulnerable. It lacks the industrial base to keep itself self-sufficient. As CoVID showed, a disruption of supply lines could be disasterous. And those Asian countries have also figured out the power they have over America by controlling the supply lines.
Security and self-sufficiency cost. Americans who want to be vulnerable to the rest of the world because their shirts are more affordable will have to accept that weakness. Those who don't and want to push American strength will have to pay more.
They will still need to import. Even Levi's aren't made in USA anymore
DeleteSo inflation, people will have less cash in their pockets. Maybe a few entrepreneurs will produce locally. But wages are higher in USA than in turkey or Bangladesh.
That's right. There will be inflation as prices shoot up because local labour and supplies cost more. But the counter is that this will imperil the economies of Asia and Africa that have relied on producing cheap goods for the US for decades and who will now have lost that income.
DeleteI've said this from the beginning. This is accurately called a tariff war. In a war, the side that starts it expects to take damage but they also expect to inflict a lot more damage on the other side. That seems to be Trump's strategy.
Chaos and artificial recession.. is all that he will achieve by this.
DeleteGarnel so Trump is lying about this being reciprocal tariffs? This is all about eliminating or reducing trade imbalance
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